Hedge funds and private-equity investors are bidding up prices of some troubled assets in Europe, sparking a surge in sales by banks seeking to rid themselves of soured corporate loans.

For years after the financial crisis, European banks resisted selling their corporate loans for fear of having to record heavy losses. But recently, some European lenders have reversed their stance as demand for these assets has jumped. One reason for the shift: Defaults and bankruptcy filings have declined in the US, leaving investors with fewer opportunities to buy distressed debt and sell it for a profit in a restructuring.

"The prices have risen to the point where some banks are looking to sell because they're seeing transaction prices that imply" a much smaller loss for certain assets, said Ari Lefkovits, a managing director at Lazard, who moved to London in August 2012 in part because of an anticipated uptick in European restructuring activity.

That is a boon for the band of distressed-debt investors who set up camp in Europe shortly after the financial crisis hoping to cash in on bargain-basement prices only to find themselves with little to do. The problem is that the recovery in loan prices that is luring the banks into sales will cut into investors' profits and margins.

Centerbridge Partners, Oaktree Capital Management and Apollo Global Management have been actively buying troubled debt from European banks, people familiar with the matter have said. These firms, some of which have raised big funds for distressed situations, often amass debt positions that give them significant control in a restructuring.

European banks had roughly $1.4 trillion in nonperforming loans on their books in 2013, up from $715 billion in 2008, according to PricewaterhouseCoopers. In 2013, banks sold $90.5 billion worth of troubled debt to investors, compared with $64 billion in 2012, an increase of more than 40%, according to a recent PwC report.

Sweden-based Nordea Bank recently sold a roughly $200 million block of Eitzen Chemical's debt for around 80 cents on the dollar, people familiar with the matter said. Investment firm Angelo, Gordon & Co. and Goldman Sachs bought some of the debt, these people said.

In recent weeks, European banks have sold debt of restaurant company Tragus Group to investors including Apollo, and French retailer Vivarte sold debt to investors including Oaktree, in some cases for more than 75 cents on the dollar, people familiar with the matter said. Oaktree also is buying debt of troubled real estate and shipping companies, the people said.

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Distressed-debt investors, which buy soured debt for the lowest possible price from banks and bondholders looking to cut their losses, usually pay far less than 80 cents on the dollar. After they buy the debt, sometimes for as low as pennies on the dollar, the investors push for restructurings that will earn them a larger payout when old creditors are repaid.

A lack of distressed debt in the US has been a catalyst for the higher prices in Europe, some say. Investors have found few opportunities in the US in recent years as defaults and bankruptcy filings have fallen sharply. US commercial bankruptcy filings fell 24% in 2013, according to Epiq Systems.

Higher prices mean smaller margins, but some distressed-debt investors see value in squeezing out small profits on large blocks of troubled loans. Others buy up the debt hoping to take control of the companies, a strategy known as "loan to own".

European banks, meanwhile, are under pressure to unload bad assets as the European Central Bank conducts its Asset Quality Review. Results are expected to be announced publicly in the fall, and that has been motivating some banks to sell faster.

Italy's UniCredit recently set aside about $12.9 billion to cover bad loans in the fourth quarter, more than double what it allocated a year earlier. The balance-sheet cleanup resulted in one of the largest losses ever recorded by a European bank, but stock investors welcomed the move to get rid of the troubled debt.

Similarly, Royal Bank of Scotland Group said in November it created an internal "bad bank" that would free up as much as $18 billion of capital. This vehicle includes a portfolio of shipping-company debt it already started selling, people familiar with the matter said.

At the end of 2013, RBS sold its roughly $800 million debt position in New York-based Eagle Bulk Shipping for between 85 and 88 cents on the dollar to buyers including Oaktree, people familiar with the transaction said. Eagle Bulk and some of its creditors are in restructuring talks, some of these people said.

Around that time, Norwegian bank DNB sold around $600 million in Genco Shipping & Trading debt, also for around 85 cents on the dollar, to buyers including Centerbridge, these people said. New York-based Genco is in negotiations with some creditors on a restructuring expected in April, some of these people said.

"This was a very large commitment for DNB given the long-term challenges within the dry bulk market," a DNB spokesman said in December. "When the offer was on the table we could not let this opportunity pass."

One restructuring adviser keeps a list of around 60 over-leveraged European companies that should restructure. But some of the banks holding the debt aren't selling and have instead altered debt terms and pushed out payments.

"The lax regulatory oversight on the continent in many cases encourages banks to extend maturities and waive covenant violations in order to avoid potential write-downs," said Jame Donath, who founded investment firm Magnolia Road Capital in 2013 to focus on European credit. "At some point, the day of reckoning will come and the debt will have to be restructured."